Remortgaging - 2 year or 5 year fixed?

[Dingdong99]

Wondering which option to go for in the current climate. I was thinking safer to go for 5 years, but I'm hoping to move house in maybe 2 to 3 years

My mortgage advisor thinks 2 years, as it'll give me more options when I move house as I wont be stuck with my current provider, but this seems risky with rates going up

But if I do move house, I would need to borrow a lot more money, so if I'm half way through a 5 year fixed, I'd have to take a second mortgage for the extra

Very similar position in that we explicitly took out a five-year fix despite knowing that we would break the fix at four years after checking the early repayment charge drops to 1% at the 3 yr mark. We did our calculations very carefully and we are currently over paying the mortgage by massive amounts and the 1% of what will be left in three years time will be very much easily absorbed by us so we will be able to move house. If we do end up getting a better rate with our current lender and port or mortgage then of course we wouldn’t have to pay the early repayment anyway but assuming we leave and move to a different lender that one percent of the outstanding amount is going to be very affordable. Bearing that in mind we decided to go for the five year fixed despite knowing we won’t actually stay here for five years

Personally (as someone who has always taken a 5-year fix as I value the certainty), I wouldn't be signing up to a new one now. Rates are rising in the short-term but the risk of recession is high and it is impossible to say what the BoE will be doing in 2-3 years time.

You may be able to find a portable mortgage which would allow you to move house without paying an early repayment charge if you wanted to move during the fixed term. But there are no guarantees so if it is a high likelihood you will be moving, you should factor in the charge which would likely more than offset the benefit of the fixed rate, even in a rising rate environment.

So, I'd go with the mortgage adviser.

We've just remortgaged and went with a 5-year fix as we wanted the stability of knowing what our payments would be - we got a rate of must over 3% and felt like that was a acceptable risk.
We've previously ported a mortgage - moved earlier than expected due to the stamp duty holiday in 2020 - so as long as it's a suitable mortgage, it shouldn't be a problem if you're planning to move in the future

About 6 months ago I went for a 3 year fix but am wondering if I was a bit too cavalier and should have gone for 5 years, tbh...

also remember mortgage advisors are paid commission for each mortgage they broker. So it’s in their best interests to get you on 2 year deals.

Defo 5 year op xx

You should be able to port when you move, we did this and having 2 mortgages is fine.

We did a 3 year fix earlier this year, as like the Op we are planning on moving just before it’s up. However, we’re doing a slight downsize which will mean we’ll be mortgage free so don’t want/need to be porting anything over. In your shoes Op, I’d still do three years fixed as 36 months is a longtime in the life of fluctuating interest rates.

We took a five year fix last year at 1.57% and it's the best decision I've made in a while! We now know our biggest bill won't increase further over the next crazy few months/years.

We also may move before the end of our fix- if so we will port our mortgage and if we need to apply for additional borrowing.

My DS had this exact dilemma too. He’s opting for a 5-year fixed deal at 3.24% because (like a PP said), wants the security of knowing his payments for 5 years. It’s portable, so no risk there.

His current fixed rate mortgage doesn’t expire until November, so he has the relative luxury of changing his mind on the above offer in the event of rates coming down before then (unlikely I think, but who knows 🤷‍♀️).

Personally, I would have made the same choice as my DS.

I fixed in 2020 and was crapping myself that I was up for renewal in the current climate ... turns out I'd fixed for five years and I'm very relieved!

A lot of predictions say next winter will be the end of the bad times so I'd be tempted to fix for shorter at the moment, especially if you want to move house.

TLDR: fix 5 years.

It's difficult isn't it. I, very recently, went through this.

as I was nearing the end of my fix, my bank offered me some fixed rates. I was on 1.69%. Sv was something like 2.5 & the fix was something like 2.14/2.34 I knew I wanted to fix, but couldn't decide 2 or 5 years, because although I can port my mortgage, that's only if I don't get made redundant or go back overseas to help/be with my mum. The Early Repayment Charge is quite hefty.

I let it slide onto the SV rate while I was deciding.

However, the interest rates were going up & up on the available fixes and in the end I fixed for 5 years at 2.48%.

I decided I'd regret not fixing more than fixing & either way could cost me money, but not fixing was already actually costing me money!

Choosing specifically between 2 & 5 years, I looked at 2.48% for the 3 years (difference) and even if the interest dropped to 0% what the maximum Iwould pay excess. and decided, I'd rather know it's fixed for 5 years and not going to increase than 'possibly' save myself that money (or some of it as they won't drop to 0 over the next little while!!)

If I have my current job I'll be able to port the mortgage & if I don't, I won't be moving here (U.K.) & if I need to go overseas & sell this place the ERC will just have to come out of the proceeds

I hope that makes sense.

Interest rates are still low compared with the historic average. I would fix for as long as I could, especially if you are at the high end of your affordability.

The trouble is, just as many say it won't be the end of the bad tines.

My thinking is/was that by fixing for 5 years at 2.5% the maximum I could 'unnecessarily pay' is 2.5% for the additional 3 years, but I could potentially 'unnecessarily pay' much more if the interest rates keep climbing.

Christ knows what they're going to do with the interest rates, I may gain, I may lose BUT, FOR ME, I'd rather know my mortgage isn't going to go up for 5 years & that any changes are totally within my control.

I'm in my 50's & so was a child/teen when interest rates were much higher (one time I remember my parents mortgage was 16%, I don't remember if it was higher at any point) . I don't think we'll get there this time, but I'm not under any illusion it'll stay under 4% either.

5 yr portable

Yeah, I'd have taken the 10yr fix IF I'd been more settled here & wasn't thinking about selling & going overseas (cost of ERC)

I think the 10 Yr was 2.54%. (I Fixed 2.48% 5yr) so the very most I'd be paying more than necessary would have been 2.54% and we're not likely to see 0% in any hurry!! But with the high ERC on the 10yr fix, I opted for the 5yr.

personally, I needed to get my head out of thinking about what I might be paying more than I needed to & into the 'what's the worst that could happen & how best to mitigate that'. Once I'd done that, the decision was easy! I just wish got there a bit sooner & fixed earlier at a lower rate!!

still if my musings help anyone make their minds up sooner (whatever they decide) it won't all have been wasted!! 🤣🤣

@Dingdong99

Asking your mortgage advisor is a bit like asking the fox if you should leave the door on the hen house open or closed!

when you move house, you'll have to remortgage anyway because it's not actually part ported, part new mortgage. You're only porting the rate on part of it, it's a whole new mortgage on the new property (you can't 'keep' the old mortgage because it's secured on your current property) If the rate at another bank was much much better, you could simply pay the ERC on your current mortgage & get your new mortgage with the other lender. You'll have to go through the 'getting a mortgage' drama either way.

As long as you can port the mortgage I'd go for 5 years. We fixed at the end of 2022 for 1.2% and I'm really pleased we made that decision now.